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1997 07 16 BAWA Minutes• • MINUTES OF THE REGULAR MEETING OF THE BOARD OF DIRECTORS OF THE BAYTOWN AREA WATER AUTHORITY July 16, 1997 The Board of Directors of the Baytown Area Water Authority, Harris County, Texas, met in regular session on Wednesday, July 16, 1997, at 7425 Thompson Road, in the BAWA Conference Room with the following in attendance: Robert L. Gillette, President Dan Mundinger, Vice President Peter R. Buenz, Secretary Knox Beavers, Board Member Roy L. Fuller, Board Member The meeting opened with a quorum present, and the following business was conducted. Consider Approval of Minutes for the Regular Meeting Held on June 18, 1997 Board Member Beavers moved for approval of the minutes for the regular meeting held on June 18, 1997. Board Member Mundinger seconded the motion. The vote follows: Ayes: Nays: Board Members Beavers, Buenz, Fuller, Gillette and Mundinger None Discuss Current/Future Capital Improvement Programs and Current/Future Debt Service Requirements Herb Thomas, Plant Manager, emphasized the age of the BAWA Plant (16-17 years old) and mentioned that he, Tony Brown and Fred Pack have discussed the needs of the plant to keep it in compliance with state and federal regulations and to produce a good quality product through the year 2002. There are no plans at this time to increase plant capacity beyond the current 13 mgd capacity. 970716-2 • Minutes of the BAWA Meeting - July 16, 1997 Fred Pack said that the major concern was to continue to produce good quality water and build reliability into the plant. At the top of the list for the first five years is filter rehabilitation. Basically, the filters have never been taken down, inspected and rehabilitated, although some media has been added from time to time. Therefore, Leopold, the company that manufactured the filters, was called in to perform an inspection which revealed that the filters do need a major rebuild. The second item is the travel bridges. That is the section of the plant where all the silt, sand and pathogens are removed. As the sludge falls to the bottom, the traveling bridges travel back and forth with a squee-gee type motion, rolling all the sludge to one side for pumping to the three lagoons. It is extremely important that the bridges work efficiently because if not the basins begin to fill up with sludge, reducing the volume of water that the plant can treat and resulting in the need for constant washing of the filters. The bridges are basically worn out -- the wheels are worn out, along with the rails and sprockets. The electrical cabinets are rusted out from being out in the weather. The third item is the motor control cabinets. These cabinets are located at each of the pumping stations and are being rusted away from weather exposure. The operational parts are difficult to find when replacement is necessary. The motor control cabinets are operated on old relays that need replacement. The cabinets need to be replaced with new solid state equipment. There are five major motor control centers but plans are to start with replacement of the high service motor control center since it pumps water to the city. These are three of the major items included in the five-year plan. After working the quality and service issues, there are many aesthetic issues to consider such as painting the ground storage tanks inside and out. A list for years 6-14 include looking at the pumps and motors at the plant because the plant will be over twenty years old by that time. Monte Mercer, Assistant City Manager/Director of Finance for the City, explained that when he initially began talking with Mr. Thomas about BAWA's capital needs, each wanted to take a Tong -term view. Based on that concept, in the fall of 1997 plans are to issue $1.3 million and $3.8 million in the fall of 2002 for capital project needs through 2010. The capital project needs include no allowances for plant expansion or changes to regulatory requirements (such as TNRCC.) In determining how to make this work, Mr. Mercer considered that the current debt service will be paid off in 2003. • 970716-3 • Minutes of the BAWA Meeting - July 16, 1997 The debt service payment for fiscal year 1998 is $1.58 million. The average debt service is approximately $1.42 million with a peak of $1.64 million in the year 2000 and final payoff of existing debt in fiscal year 2003. Due to the short duration of the existing debt, plans are to use reserves established for debt service to supplement current funding of approximately $1.5 million. In addition, BAWA will pay interest only on the proposed $1.3 million bond issuance until the existing debt is paid off. This is being recommended due to the short duration of the existing debt and the moderate size of the debt to be issued. Funding for debt service will be provided from current revenues (approximately $5.1 million) and reserves established for debt service. In summary, BAWA is looking at spreading its debt out to 2003-2004 to have a recurring debt payment of about $1 million to the year 2009. In addition, we feel that the current rate structure will enable us to pay for debt to be issued this fall and existing debt. The amount needed to fund additional debt services will come from cash reserves since the current rate structure will only fund $1.5 million. Generally, Mr. Mercer would not recommend this, but because of the short term nature of the debt, this is the most prudent thing to do at this time, rather than raising the rates for three years and then dropping the rates. In response to Board inquiry, Mr. Mercer explained that BAWA has a debt reserve of $640,000 and an operating reserve of $800,000, which total $1.4 million. The debt reserve will be drawn down and almost depleted by the year 2000 but the debt falls off by the year 2000, leaving an operating reserve of about 70 days. If it should become necessary in the interim, rates can be adjusted to compensate. Based on Mr. Mercer's calculations, in 2003 BAWA will start to build the debt reserve back. Manager's Report Flows - The flows at the plant are increasing with the decrease in rain and the increased heat. Complaints - One or two complaints are received a week from Baytown due to dead end lines. The corrosion program is still working very well. The TNRCC has reduced BAWA's requirement for monitoring of lead and copper. The next testing for lead and copper will be conducted in the next couple of weeks. • 970716-4 • Minutes of the BAWA Meeting - July 16, 1997 TNRCC Inspection - On July 1, the TNRCC came out to do an annual inspection. The inspection took about 2 '/2 hours. Before the inspectors left, they informed Mr. Brown that no new discrepancies were found and old discrepancies had been corrected. Adjourn There being no further business to be transacted, the meeting was adjourned. Minutes 97BAWA 7-16-97 • Peter R. Buenz, Secrbtary